This may be addressed in a thread somewhere but I haven't been able to find anything....

Can a lender decline a loan because of the purpose of a loan?

We have joint applicants wanting to borrow funds to clone their dead dog.....

Apparently they've done their research....they are an older couple.....

I know if something is illegal we can refuse....but this is more ethics oriented.....

At about $50,000 - if they need a loan they can't afford it. I would just say you do not loan for that purpose.

Thanks, Randy.....does this require an AAN....this is still at the discussion stage before an application has been submitted....

Can we just tell them we don't do a loan for this purpose and bypass taking an application altogether?

Also, should we add something like this to our policy....we have a policy for "undesirable loans" I thought this might fit one of our categories: Loans to individuals or businesses to finance ventures outside their area of expertise or experience.

Yes - you probably would make a similar loan for another purpose, so yes, a AAN would be required. You should not discourage any application unless they specifically ask you if you considered loan purpose and you explain your policy without specifically telling them no.

I would not get too concerned about policy, unless you think that this is going to start becoming a regular type of request.

Not beat a dead horse here....

On the AAN we would say we are declining the request because of the purpose....

Will an examiner question this? Is it sufficient to document that we didn't approve of the purpose???

No, I doubt this will start becoming a common loan request anytime soon...lol....maybe as time goes on....

I meant a generalized statement.....not really sure what that statement would be...

If you use the format of the AAN that includes the reasons, then you have to give them the specific reason.

We do not make loans for the purpose intended.

But, would you clone the said dead horse???

Oh - good one

LOL DeeQ....that didn't dawn on me......:)

I'm curious why exactly you're denying? Bank management thinks it is unethical to clone a dog? Seems like a strange thing to get hung up on unless your management has expertise in bio-medical ethics.

If they have good credit and collateral to meet your standards for any other loan, what difference would it make if they're using the money to pay for their daughter's wedding, a vacation to Bora Bora, to pay medical bills, or to clone an animal. I'm not sure I'm seeing any difference in the risk here.

This was my thought as well.

Maybe because the bank is worried that it might really be a scam and/or elder abuse. Can you clone a dog - sure. Do you end up with the same dog - no. Might as well just get another one of the same breed. Like I said before, if you have to take a loan to do it, you cannot afford it. I would decline such a request from an "older couple".

Suspected elder abuse is one thing, and brings reporting obligations at the state and/or local level. Beyond that, however, unless the bank reviews the purpose of every loan, picking and choosing which loan purposes are reviewed is ripe for abuse.

Consistency is necessary, with a legitimate reason, ideally documented with facts/data.

A bank many years ago declined a small ”home improvement” loan for a customer. The “home improvement” the man wanted to make was for an airline ticket to get his mothers-in-law back to Illinois.

Depending on the in-law relationship, that might be an improvement!

If they need the loan for a wedding/vacation, they can't afford that either.

Also, getting a little close to age discrimination for my liking if the fact that it is an "older couple" has anything to do with it.

Oh come on - that is crapola. A bank does not have to make a loan they don't want to make as long as it is not discriminatory. Just because I am creditworthy does not mean you have to make me a loan for anything I want to do with the money. Like everyone said, consistency is the key, and if I was the banker I would consistently deny anyone that approached the bank for a loan to clone an animal. I would not subject the bank to that sort of publicity.

I want to open a brothel in Nevada - what is the difference?

Just no comment.